Correlation Between Edgewell Personal and L’Oreal Co
Can any of the company-specific risk be diversified away by investing in both Edgewell Personal and L’Oreal Co at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Edgewell Personal and L’Oreal Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edgewell Personal Care and LOreal Co ADR, you can compare the effects of market volatilities on Edgewell Personal and L’Oreal Co and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Edgewell Personal with a short position of L’Oreal Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edgewell Personal and L’Oreal Co.
Diversification Opportunities for Edgewell Personal and L’Oreal Co
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Edgewell and L’Oreal is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Edgewell Personal Care and LOreal Co ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal Co ADR and Edgewell Personal is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Edgewell Personal Care are associated (or correlated) with L’Oreal Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal Co ADR has no effect on the direction of Edgewell Personal i.e., Edgewell Personal and L’Oreal Co go up and down completely randomly.
Pair Corralation between Edgewell Personal and L’Oreal Co
Considering the 90-day investment horizon Edgewell Personal Care is expected to under-perform the L’Oreal Co. In addition to that, Edgewell Personal is 1.21 times more volatile than LOreal Co ADR. It trades about -0.05 of its total potential returns per unit of risk. LOreal Co ADR is currently generating about 0.06 per unit of volatility. If you would invest 7,025 in LOreal Co ADR on December 28, 2024 and sell it today you would earn a total of 357.00 from holding LOreal Co ADR or generate 5.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Edgewell Personal Care vs. LOreal Co ADR
Performance |
Timeline |
Edgewell Personal Care |
LOreal Co ADR |
Edgewell Personal and L’Oreal Co Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Edgewell Personal and L’Oreal Co
The main advantage of trading using opposite Edgewell Personal and L’Oreal Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgewell Personal position performs unexpectedly, L’Oreal Co can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in L’Oreal Co will offset losses from the drop in L’Oreal Co's long position.Edgewell Personal vs. Mannatech Incorporated | Edgewell Personal vs. Inter Parfums | Edgewell Personal vs. Nu Skin Enterprises | Edgewell Personal vs. Helen of Troy |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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